On December 6, the City Council is scheduled to vote on whether to officially declare a fiscal emergency and place this retirement reform ballot measure before the voters in a March special election. Mayor Chuck Reed has released the following statement:

San Joséis in a crisis. We have an emergency. The report released today documents the service level disaster that looms in our future if we don’t bring our skyrocketing retirement costs under control.

It is now time to place retirement reforms before the people of San José. We have been negotiating with our 11 unions over the terms of a retirement reform ballot measure for nearly six months. While we have not reached an agreement with our unions, we appreciate their comments on the ballot measure, and the final version released today includes many revisions that were made as a result of these negotiations.

This ballot measure outlines reasonable reforms that will allow us to gain control of our retirement costs without cutting retirement benefit accruals that existing employees have earned for past years of service, and without reducing current payments to our retirees.

Our employees are dedicated, hard-working people, but if we fail to act,the ultimate consequences would be severe and devastating cuts to our workforce and to our services. Just next year, we are facing another $80 million budget shortfall that could force us to eliminate hundreds of jobs, close libraries and community centers, and reduce our already-too-small police and fire departments. That’s the last thing I want to do.

By placing this measure on the March ballot, savings can be achieved in time to avoid cuts and layoffs next fiscal year. Approval by the voters in March would allow sufficient time before July 1, 2012 for the retirement boards to make modifications to the cost of retirement benefits, the Council to include those changes in the budget process, and legal challenges to be considered before the changes take effect.

Placing these reforms on the ballot will allow the people of San José to decide critical matters that will have a dramatic impact on their quality of life. After six months of discussion, debate and negotiations, it is time to act.

Background on Retirement Reforms & the Proposed Ballot Measure

Over the past decade, the City of San Jose has seen the cost of providing employee retirement benefits skyrocket – from $73 million in FY 2000-01 to $245 million this year. By FY 2015-16, the City’s contribution is projected to exceed $430 million per year (all funds) and close to 1/3 of the General Fund will be dedicated to retirement costs.

In May 2011, Mayor Reed, Vice Mayor Nguyen, and Councilmembers Herrera and Liccardo released an initial set of reforms to bring the City’s skyrocketing retirement costs under control. Over the past 6 months, these reforms have been modified (based in part on feedback from the City’s employee unions during negotiations) and placed in a proposed ballot measure.

Placing new employees into a new, lower-cost “hybrid” retirement plan.

Giving current employees the choice to either a) pay a larger share of the cost for their current retirement plan, or b) opt-in to a lower-cost tier of benefits that preserves the benefit accrual rate for past years of service.

Temporarily suspending cost-of-living increases for retirees.

Reforming the rules around disability retirement to prevent abuses.

Requiring voter approval to increase retirement benefits in the future.